LEARN
What are Working Interest and Royalty Interest?
Definition
A Working Interest (WI) is an ownership interest in an oil and gas property that generally participates in both the economics and the costs of developing and operating the property. A working-interest owner may receive a share of revenue from production while also being responsible for its share of applicable drilling, development, and operating expenses. A Royalty Interest (RI) also provides an economic interest in production but generally does not include responsibility for drilling or operating costs. The specific rights, revenue interests, deductions, and obligations associated with either type of ownership depend on the agreements governing the property.
Practical questions
- Why am I responsible for certain well costs?
- What portion of revenue is associated with my interest?
- How does ownership affect the economics of a well?
- How do costs affect a working-interest owner’s return?
- Why might two owners in the same property have different financial results?